Drawdown recovery calculator

Why the numbers get bad so quickly

Losing 20% leaves 80, and getting from 80 back to 100 is a 25% gain. Losing 50% leaves 50, and getting back is a 100% gain. Losing 80% leaves 20, and recovery requires 400%. Each additional slice of drawdown costs disproportionately more to undo.

This is the whole argument for controlling drawdown ahead of maximising return. Two systems returning the same amount over a year are not equivalent if one drifted down 8% at worst and the other fell 40% before recovering.

The number that ends most systems is behavioural

The recovery arithmetic assumes you are still running the strategy. In practice the deeper failure mode is switching it off near the bottom, which converts a temporary loss into a permanent one and forfeits the recovery entirely.

Our own validated maximum drawdown is roughly 20% across two separate test periods. That is the number to decide about in advance: an account you cannot watch fall by a fifth without intervening is too small in a sense no calculator captures.

Time is the hidden cost

At 3% a month, recovering a 20% drawdown takes about eight months of uninterrupted gains — and real recovery is slower because it includes further losing months along the way. The months figure here assumes a smooth path, which never happens, so read it as a best case.